Airline Mergers Aren't Likely to Make Fares Soar

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Customer service could suffer if US Airways and United Airlines merge, but concerns about fewer flights and higher prices are unjustified, experts say. The recent spate of airline-merger news -- including a planned tie-up between British Airways (BAY) and Iberia Airlines, as well as reported negotiations between United Airlines (UAUA) and US Airways (LCC) -- could lead to rising share prices and better bottom lines for companies that can cut costs by consolidating services and routes.

What it probably won't lead to is much change for fliers. Aside from some customer-service issues that will likely develop, most travelers won't notice a difference.

"What does it mean for you and me? Not a lot," says airline industry expert Mike Boyd of the Boyd International Group. "It's a myth that this consolidation will mean you will pay more and seats will be slashed."

Competition, Not Costs, Drives Airfares

As proof, take Delta's (DAL) buyout of Northwest Airlines in 2008. Boyd says it resulted in no flight reductions or price changes. In fact, the merged airline added capacity.

That's not to say that prices won't rise for other reasons.

The biggest factor behind escalating airfares these days is more passengers taking to the skies as the economy slowly rebounds. And even before the mergers began, all airlines were reducing routes and cutting back on capacity. "There's still a lot of competition out there, and that's driving the costs, not the consolidation," Boyd says.

A Sensible Marriage

If United Airlines and US Airways do tie the knot, a transition is likely to be fairly smooth, as far as airline mergers go.

For one thing, these airlines already have code-sharing agreements in place, so when customers book a flight on United, they may actually end up on a US Airways flight, say Randy Petersen, editor of Inside Flyer magazine.

"It's nothing like the days when airlines had nothing in common, like the merger of American and TWA," he says.

And, as with Delta's Northwest buyout, the potential United Airlines and US Airways merger actually makes sense. The two carriers' routes and hubs have little overlap, so that merging would give them a broader reach.

Customer Service Will Remain Weak

One likely plus for US Airways customers would be the potential to participate in United's frequent-flier program. United Mileage Plus program is considered one of the best in the industry, says Petersen, who has 17 million frequent-flier miles.

But one drawback could be that customers may end up on smaller regional jets instead of traditional Airbus or Boeing aircraft. US Airways serves some smaller markets and makes use of smaller planes.

Passengers might also run into customer-service issues as different corporate or regional cultures collide. East Coast branded airlines tend to handle customers differently than those based in the South or the West, for instance. But even in terms of customer service, Boyd says fliers can relax: "They can continue to expect flying to be as inconvenient and hassle-laden as it is today."
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